MINISTER FOR Finance Brian Lenihan is set to change legislation designed to reform the State’s financial regulation on the advice of the European Central Bank (ECB).
Mr Lenihan recently sought the ECB’s opinion on a Bill he is bringing before the Oireachtas, which will merge the Central Bank and Financial Regulator.
The new law is designed to address key flaws in the Republic’s banking regulation systems which contributed to the financial crisis.
The Minister said yesterday he was proposing to introduce two amendments to the Bill next week to take into account recommendations made by the ECB in a formal opinion on the legislation which the European watchdog published recently. Mr Lenihan said the changes dealt with the independence of the Central Bank.
One specifically relates to governor Patrick Honohan’s responsibility for carrying out tasks that form part of the institution’s role as a member of the European System of Central Banks (ESCB).
The ECB’s opinion stresses that the bank must be independent and have a clearly defined mandate.
“As regards ESCB-related tasks and their performance, the governor, the bank, the commission and its individual members must all be independent, and must not seek or take instructions from the government as far as those tasks are concerned,” it says.
Mr Lenihan said his amendments were designed to take on board the key issues raised by the ECB in its opinion. He said it would not be possible to deal with all of its concerns when the Bill reached the report stage next week, but he would consider including other recommendations in a second Central Bank Reform Bill which the Government plans to introduce in the autumn.
He was “receptive to the principle behind these comments and is anxious that the Central Bank legislation will underpin appropriately the independence of the institution”.
Because the Irish Central Bank is part of the EU’s central bank system, the Government has to seek a formal ECB opinion on any legislation dealing with it.
The Bill is the first of three new laws designed to reform the State’s financial regulation. It provides for a single Central Bank run by a commission. The institution will take over responsibility for financial regulation from the Irish Financial Services Regulatory Authority (IFSRA), which is being abolished.
The law will also abolish the posts of chief executive of IFSRA and consumer director, and replace them with a head of financial regulation and a head of central banking, who will report to the governor and commission.
